What is the nature of the crisis Greece is facing? Why is the program needed?
Greece is highly indebted and lost about 25 percent of its competitiveness since Euro adoption. At the end of 2009, the general public deficit reached 13.6 percent of GDP and public debt had increased to 115 percent of GDP. Even with the lower deficits envisaged under the program, the debt as share of GDP will continue to peak at almost 150 percent of GDP in 2013 before declining thereafter. In past years, Greece’s public sector spending grew, while revenue fell. Then the global recession hit and economic activity slowed and unemployment rose. This exacerbated the fiscal situation. Financing costs for Greece rose rapidly, adding to the already high debt burden. To stop these snowballing dynamics, the Greek government realized that a strong economic program was the only viable option.
